Today, the way digital media (e.g. video, text, and audio) is consumed in China online via search and social distribution (e.g. emailing links, blogging, etc) requires that content be virtually free to distribute and consume.

To wit, users want unprotected, legal content in quantity and at a low price.

So, one of the main barriers preventing such a content service from succeeding in China is the reluctance of major content providers to distribute their content without the protection of a Digital Rights Management (DRM) standard. Contrary to widespread belief, the fact that existing models fail in China has very little to do with the fact that illegal content accounts for more than 99% of all digital content on China’s web or the misguided belief that locals won’t pay for content, but rather because, until very recently, no one has come up with a scalable, profitable and legitimate solution that properly compensates content owners for their property.

And this is why we are so excited about our recent investment in Feilio as we believe they have the answer content providers, worldwide, have been pining for.

Feilio’s solution is a service that aggregates and distributes legal content to Chinese consumers while fairly compensating content providers for the use of their digital content.

The service works is as follows:

Content aggregation: Feilio registers content from publishers and producers of audio, video, and text media. Digital fingerprints are created to identify each media file, linked to its ownership and metadata. File usage is tracked on end-user devices using client software that also provides user interfaces, search, recommendation, and social networking functions to help people discover new media.

Content Distribution: Feilio provides content licenses to networks converting previously illegal file sharing and copying into legal activities, inoculating universities & networks against copyright infringement litigation. Users (e.g. students) need not change their current file sharing behaviors associated with free content sites.

The capital we are investing will go to scale Feilio’s platform, expand its nationwide network to +300 universities, and aggregate content.

We are thrilled to be part of Feilio, a groundbreaking company that seeks to not only remedy China’s digital content piracy problem but also ensure content owners are able to monetize file sharing.